“Short-term, long-term proposals can take country to the next level”

Chambers and Businessmen and Research institutes opined that the interim budget presented by President Ranil Wickremesinghe has very commendable short-term and long-term proposals that can take country to the next level.

National Chamber of Exporters of Sri Lanka President Ravi Jayawardena said the Interim Budget presented by President Ranil Wickremesinghe was a very good budget. “Given the circumstances, the President has done a good job,” he said.

For example he said the unit set to restructure the State sector was a good move and if it was not done it would be a drain on the coffers. Also measures such as increasing the GST were necessary because unless the government earns some money it cannot survive.

Similarly bringing the retirement age down was necessary to get young people into the system and welfare measures such as giving an extra allowance to pregnant mothers was a brilliant move.

He also said granting 20% stake to Bank employees too was a good proposal. Jayawardena said that this was a very good budget given the challenges the country faced.

Chairman of the Ceylon National Chamber of Industries (CNCI), Canisius Fernando said that the proposal to have a one economic policy for 25 years is a proposal the business community was looking for many years and Finance Minister Wickremesinghe should be complimented for that.

He also said that appointing a body to monitor corruption will increase investor confidence and is also another bold step taken in the right direction. “Also the second body to monitor progress of government institutions too was a good proposal.”

“Now we are eagerly waiting to see how these would be implemented as these are very tough decisions to implement.”

He also hailed the move to provide handouts for the ‘poor’ which was timely.

He however he said that raising the VAT from 12% to 15% when there is an economic down turn is not viable. “If the Economy was on a sound footing and dollars and commodities and raw material were freely available it would have been justifiable. However this is not the opportune times to increase VAT.”

The Ceylon Chamber of Commerce views the Interim Budget for 2022 delivered by President Ranil Wickremesinghe in his capacity as Minister of Finance, as a positive step towards rebuilding the macroeconomic framework of the country.

The Budget provides an estimate of the expected revenue and expenditure of the Government for 2022 within an environment of high inflation and can be built upon towards meeting the aspired targets in the medium-term fiscal consolidation program.

The Chamber notes that several proposals it has submitted in the past relating to State-Owned Enterprise (SOE) reforms, trade reforms and strengthening of the financial sector have been prioritized in the budget speech. We underscore the need for meaningful SOE reform to be driven through the proposed SOE Restructuring Unit while also re-establishing the National Agency for Public Private Partnership, which could be a catalyst to attract FDI.

The setting up of an independent National Debt Management Agency as announced will also be vital in the management of public debt with greater transparency and governance. We also recognize that certain new areas of legislation will be looked at such as on bankruptcy while existing legislation like the Termination of Employment of Workmen Act will be reviewed. We look forward to play a meaningful role in these discussions towards such legislative reforms.

We recognize the priority given to exports and trade by revitalizing the National Export Strategy, implementation of a Trade Adjustment Programme to facilitate the phasing out of Para tariffs as well as broadening of existing trade agreements. The proposal related to the optimal use of railways for the transfer of agricultural products is also welcome and has been a key ask from the private sector for numerous years. The focus on providing more independence to the Central Bank through a new Act is also welcome.

The proposal to facilitate the establishment of branch campuses of foreign universities through the BOI is seen as a step that can create more opportunities for local students while generating foreign exchange earnings by attracting foreign students.

We seek further clarity on the implementation of the revenue proposals which were announced in May 2022 as these need to be legislated soon if they are to become effective from the 1st of October as outlined in the Interim Budget.

While acknowledging the progressive proposals outlined in the budget speech, the key will be in terms of implementation which successive Governments have failed to carry out thereby reducing the credibility of the fiscal framework and the effectiveness of budget proposals.

“We request that there be greater accountability and transparency in the process of implementation and we look forward to supporting the policymakers where possible to streamline the implementation process in line with best practice. We also request Government to look at ways to reduce unjustifiable expenditure as much as possible and direct it towards meaningful social protection programs or assist in meeting fiscal and primary deficit targets.”

“We hope that with the Interim Budget in place and implementation of the proposals outlined, it would be a catalyst towards reviving growth and eventually putting the country on an accelerated growth path. This is vital for the country to emerge from this crisis.”

“The Ceylon Chamber as the premier Chamber and voice of the private sector will continue to support the policymakers in implementing progressive reforms. We hope with a sound fiscal framework in place it will pave the way to an eventual IMF programme that would help stabilize the economy and mobilize financing to address the current shortfalls in external cash flow.

Meanwhile First Capital Research said that the overall budget proposals presented yesterday have no impact to corporate or the capital markets. Moreover, previously expected Capital Gains Tax (CGT) was also omitted from the Interim Budget 2022.

“This is expected to be a big positive to the capital markets, given that investors took a cautious approach anticipating the introduction of CGT during the days leading to the budget.”

“However, President Ranil Wickremesinghe proposed several tax reforms on 31st May 2022 which will come in to effect from 01st October 2022.”

President Ceylon Institute on Builders and businessmen who heads several corporate institutions, (CIOB) Dr. Rohan Karunaratne said that they appreciate the presentation of such a budget at a time of economic crisis in the country.

Only 30% of Sri Lanka’s construction industry is currently operational. Due to the current economic crisis, 70% of the industry has been crippled. The amount owed by the government to various contractors for construction projects is about Rs. 150 billion.

These forward contractors have taken bank loans for construction projects and the banks are exerting pressure to pay them on time. The backbone of our construction industry is the small and medium scale construction industry. Its employment is about 40 lakhs.

“Despite these issues the current budget has not spelt any proposals to save the construction industry from this crisis. It is a drawback.”

Meanwhile the Chamber of International Trade Information Services welcomed revenue proposals relating to the Interim Budget noting that the budget contained several progressive measures to undertake serious reforms to stabilize and restructure the economy.

Chairman Pelwatte Dairies Ariyaseela Wickramanayake said that he is full of praise for the budget as it has discouraged the import of Milk and other such commodities that can be made in Sri Lanka. “This will take the country towards self sufficiently in Milk earlier than expected.” Sri Lanka will also be able to export some products as well.”

Sri Lanka milk power import bill four years ago was USD 450 million and it has now drastically dropped. In contrast the local Dairy producers now pay around Rs. 3 million per month to purchase local milk from farmers.

“This decision should have been taken long time ago”

“I also commend the budget proposals initiated towards encouraging local agri and dairy industry sectors.

The interim budget proposals presented by President Ranil Wickremesinghe, is more of a working budget with many pro-active proposals to be implemented.

Though the direct increases in government revenue could be attributed to the increase in VAT, it is envisaged that the re-structuring of the SOE’s through the sale of shares too should bring a significant contribution to the government revenue. “A mechanism is also in place for the restructuring process. I believe the increase in the corporate tax to 15% from 14% for exporters, could be justified since most exporters are at an advantage at present, due to the currency depreciation,” said Dilip de Silva, CEO, Serendib Horticulture Technologies Pvt Ltd.

The present predicament of the country caused by the banning of agriculture fertilizer and chemicals too has been addressed with US$ 110 million has been allocated for the import of Urea that is required for the Maha Season. It is hoped that the relevant government agencies will expedite the process of importing to ensure the farmers get the fertilizer on time. If not, this season too will result in lower yields which will put more pressure on food security.

Rs. 400 million has also been allocated for the development of seed and planting material required by the country.

“As mentioned before it is up to the local scientists and officials at the Department of Agriculture to ensure these funds are utilized effectively which will result in the farmers getting the required seed and planting material.”

Research and Development in agriculture should be more focused on commercial application and I hope the Department will take up this challenge to contribute in achieving the required seed and planting material. The department should look at getting the private sector involved in scaling up the production during a short period of time, said Dilip de Silva.

The Interim Budget proposal to remove VAT exemption on Condominium Residential Apartments effective from 1st October 2022 and proposed corporate tax rate on construction industry from 14 percent from 15 percent will have a negative impact on condominium industry which has already come under severe stress due to ongoing economic crisis, says Nalin Herath, Chairman and Managing Director of Home Lands Group of companies said.

Sri Lanka’s construction sector in particular luxury apartment developers face numerous challenges due to certain import restrictions imposed on sanitary ware accessories, aluminum and rising global prices of steel and copper and higher lending rates. These factors are putting a strain on the construction of housing and apartment units in a big way.